Hi Rdickers, how big is your craft business and are you selling locally or online?  by the way what kind of craft are you selling, clothes or knitted stuff?

Hi, You'll find some great information about online businesses on our Business Law Advisor blog in a post called "Making Money Online."  You'll find a link to the IRS' guide to whether your venture qualifies as a business or a hobby, which will answer your questions about taxes.

As long as you sell only to family and friends occasionally, the IRS would classify your business as a hobby business. As such, you don't need to register a business name. You will pay taxes on the income less the expenses, but you cannot deduct more expenses than you have income. When you file your personal taxes, you would report your earnings under "Other Income." If you begin selling to the public, either on a web site, in person or through consignment, then you have become a business. You need to register your business name and entity type with your state or county agency that handles such matters. You will also need to obtain a sales tax permit and collect tax on sales. If your city requires all businesses to have a business license, you will need to obtain one from your city clerk's office.